In the past, domestic companies needed to pay tax on paper gains from their cryptocurrency holdings. However, they will now be required to do so when they sell the asset.
Allegedly, Japanese companies will no longer be needed to pay tax on ‘unattained gains’ cryptocurrency holdings from April 2024.
Japan to Impose New Tax Reforms
This was after the Cabinet sanctioned the revision of the national tax regime for digital assets. Local reports reveal that Japan’s government introduced the new tax reform in December 2022 after a cabinet meeting.
The new changes will be implemented in April next year, the beginning of the nation’s financial year. Earlier, reporting cryptocurrencies held by corporations acquired from third parties was mandatory.
The reporting was founded on the variation between book value and market value, irrespective of whether the company sold the cryptocurrency. However, corporations will now be taxed on profits from cryptocurrencies sales.
This is analogous to what retail investors should adhere to under the nation’s tax regulations. In a document published on December 14, the Japanese government unveiled the initial information regarding its 2024 tax reform outline.
Industry Leaders Seek to Increase Web3 Adoption in Japan
Nevertheless, the Financial Services Agency earlier submitted the plan to eliminate unattained cryptocurrency profits on August 31. The relaxed tax regulations could result in more firms pursuing Web3-associated activities in Japan.
Progress has been achieved with Circle, a stablecoin provider and the team behind USD Coin (USDC), lately partnering with SBI Holdings, a Tokyo-founded financial services company, to improve Web3 services and the adoption of stablecoin in the country.
The pro-crypto changes initiated in Japan is set to attract more crypto projects and talent into the country.
This happens as Japan’s tax authorities identified 548 cases related to contravening cryptocurrency tax regulations from 615 inquiries last year. This figure was a 35% increase from the previous year.
The average value of undeclared cryptocurrency holdings reduced 19% from 36.5M yen ($245000) in 2021 to 30.7M yen ($206000) last year.
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